Guest post by Chase Paymentech, providing thousands of Verizon customers’ best-in-class debit and credit card processing through Verizon Merchant Services. Get the insight you need into how payment processing really works and how to use it to your advantage with our series: The Skinny Behind the Swipe.
Now that you know the types of equipment required to process payments, and exactly what you need to process payments, you are ready to find out more.
What exactly will accepting more than cash and check cost you? You already know that accepting debit and credit is much more convenient for your customers, but is it worth it? The answer is yes. In 2011, roughly 60% of the total share of retail point-of-sale dollarvolume was purchased with a credit or debit card* and that percentage is steadily rising. So you know you need to accept credit and debit cards, but, how do you know if you’re paying too much to accept them? Below you’ll find some basics of what makes up payment processing pricing.
Total Cost Of Acceptance
What you’re really paying – your total cost of acceptance – is a combination of the rates you are charged to accept credit cards and access the various payment networks, which are regulated by the payment brands (Visa, MasterCard, AMEX, JCB) and the fees you pay your credit card processor. Here’s a high-level breakdown:
Interchange rate: Interchange rates make up by far the largest portion of your total cost of acceptance. The rate, which is based on many factors, including the type of card used, whether the card is present or not present at the time of the transaction, and the merchant’s overall type of business, covers the cost incurred by issuing banks for offering lines of credit and fraud mitigation. You will pay interchange rates regardless of which payment processor you choose.
Assessment fees: In addition to interchange rates, the individual payment brands, such as Visa and MasterCard, may charge separate assessment fees which cover the operating costs of managing their payment network. These are also mandated by the individual payment brands and not your payment processor.
The Processor fees: These are the fees you pay to your particular processor for accepting and processing credit and debit cards. Each processor is different and many factors go into calculating their fees: number of locations, equipment, connectivity, third-party gateways, reporting needs, etc. Processor fees may also include any monthly minimums, annual, start up fees and more.
The total cost of accepting cards includes all of your monthly fees and how they apply to the number of transactions and types of transactions your business processes. This is the amount that you really need to know.
A Payment Processor With Nothing To Hide
It is critical to work with a company that you know will disclose all fees and patiently explain the fee structure so you know what to expect. A properly trained merchant services professional will calculate your anticipated effective rate and help you understand everything. It is most important to know your overall cost of acceptance and not be drawn in by seemingly low teaser rates that may not pertain to the types of payments that your customers will be using. So, arm yourself with this knowledge when a payment processor throws a really low rate out there. Don’t bite until you have a clear understanding of all the details.
But How Do I Know If I’m Really Getting A Good Deal?
Ask your payment processor to do a comparison! If you already accept payments, ask your prospective processor to compare statements. They should be able to show you what you’re paying with your current processor and what the difference could be with them.
To get insights on how new research, technologies and regulations in debit and credit card payment processing can help grow any small business in this sluggish economy, watch this free webinar, presented by Verizon.
*2012‐2017: RETAIL POINT OF SALE FORECAST by Javelin Strategy and Research
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